Indian Telecom Regulator Orders to Safeguard Net Neutrality

Net neutrality or Internet neutrality is the principle that Internet service providers and governments should treat all data on the Internet the same. They should not discriminate or charge differentially by user, content, site, platform, application, type of attached equipment, or mode of communication.

Net neutrality and differential pricing of data are a matter of fierce debate in India and many other countries over the past few years. As against net neutrality a concept called differential pricing of data has emerged. The USP of differential pricing is zero rates for accessing few basic services like Facebook. WhatsApp, etc. While users who want to access content not covered in zero rates, have to shell out hefty charges.

Zero rates initiatives such as Free Basics by Facebook in collaboration with Reliance, and Airtel’s Airtel Zero programme have spent multi million dollars on propaganda exercises. Also we witnessed rise of a netizen-fuelled movement and furious lobbying for releasing a much-awaited set of rules and regulations. Prominent bodies like NASSCOM supported net neutrality.

The Telecom Regulatory Authority of India (TRAI) after a year-long consultation process, has laid down rules that strictly prohibit the differential pricing of data on the basis of content in India. “No service provider shall offer or charge discriminatory tariffs for data services on the basis of content. Further, no service provider shall enter into any arrangement, agreement… that has the effect of discriminatory tariffs for data services being offered or charged to the consumer on the basis of content,” the regulator said in a statement.

While Free Basics and Airtel Zero have sparked the most controversy and been the focus of much media attention over the last two weeks, where customers will be hit the hardest in the short-run is that these regulations will also prohibit the ‘free Facebook/WhatsApp’ data packages that consumers use in order to avoid hefty data charges.

One of the major exemptions to discriminatory pricing of data is all emergency services. As TRAI Chairman RS Sharma pointed out, during the Chennai floods certain communication services such as WhatsApp could be temporarily zero-rated in order to ensure that communication is up and running. Another exemption that the regulatory authority gives, is that the newly issued regulations will “not apply to tariffs for data services over closed electronic communications networks”.

Now, telecom companies cannot shape consumer behaviour by giving free access to certain websites and then charging the website owner. The internet has been protected — data must be treated equally and user choice prevails.

Telecom companies and some large internet firms had argued against this regulation in TRAI’s consultation process. After losing this bout, it’s reasonable to apprehend that they will challenge the regulations in court. Legal challenges to a regulation made by TRAI in consumer interest are regular.

TRAI has clearly indicated that the public interest is served by its network neutrality regulations. As appreciation flows in from abroad for TRAI becoming a world leader in network neutrality regulations, moderation is important, given the certainty of a legal challenge. It’s hoped that any court determining a challenge weighs the considerations that have shaped this regulation.

Banking Highlights

The savings deposits rate remained at 3.5% since 1 March 2003 for more than eight years till early this month when RBI revised it to 4%. Given the level of inflation depositors are getting negative returns. RBI has recently circulated a discussion paper on deregulation of savings deposit rate.

As per the Reserve Bank of India (RBI) directive the chief executives of foreign banks operating in India will be responsible for local regulatory, statutory and audit compliance.

The RBI raised required loan provisioning. Restructured loans are now provisioned at 2%, up from 0.25%-1%; loans classified substandard are now 15%, up from 10%; secured loans classified as doubtful for more than a year are now 25%, up from 20%; and loans classified as doubtful for one to three years are now 40%, up from 30%. These higher credit costs will reduce bank earnings this fiscal year, but enable banks to enhance their buffers against potential loan losses. Importantly, higher interest rates will negatively impact borrowers' debt-servicing abilities, and may further result in a deterioration in asset quality.

Real estate firms are turning towards Non-Banking Financial Companies (NBFCs). Most banks have shut their doors on this sector.

RBI has decided to do away with priority sector lending status for bank loans to NBFCs. With 90 per cent of commercial vehicle sales financed by NBFCs, the move by the RBI is expected to hurt the small road transport operators as it would be tough for them to access finance, which will also become more expensive.

SEBI - IRDA Battle

India’s market and insurance watchdogs are at each others' throats, growling and snarling. See how the dirty events unfolded.

Early this month market regulator Securities and Exchange Board of India (SEBI) barred 14 private sector insurers from issuing ULIPs (unit-linked insurance plans) without asking its permission. Within 24 hours, the Insurance Regulatory and Development Authority (IRDA) directed the insurance companies to ignore the market regulator’s order and continue business. Then the Government clarified in Parliament that insurers can do business in equity and bond-linked products i.e., ULIPs as per rules laid down by the insurance regulator IRDA.

ULIPs (unit-linked insurance plans) are insurance products that invest a part of the premium paid by investors in equity or debt instruments, while another part accumulates as insurance. High commissions of up to 40% have motivated the insurance agents to aggressively sell ULIPs in the past few years. ULIPs account for up to 90% of the new business premium for some of the private sector life insurers.

The fight got more spice as IRDA has threatened to ban all policies sold by the Department of Posts (DoP) in case of a failure to comply with its norms. Further adding that compliance with IRDA's norms will actually benefit the department of post.

Be it insurance policies, mutual funds or post-office saving deposits, all these are good investment avenues for Indians. The shameful fighting among regulators and a Government department has left the investors confused. This all has raised a question mark on the effectiveness of financial regulations and coordination among different governing bodies in this country. The legal battle between SEBI and IRDA over ULIPs is set to be fought in India’s Supreme Court.

Setting up of Financial Stability and Development Council (FSDC) as a super regulator may be a possible solution. The finance minister in his 2010 budget proposed to create FSDC with a view to strengthen and institutionalise the mechanism for maintaining financial stability. This Council would monitor macro-prudential supervision of the economy, including the functioning of large financial conglomerates, and address inter-regulatory coordination issues. Hope that FSDC turns out to be a coordinator in true sense and not just become an appellate tribunal for regulators.

Swiss Bank Account

We call it by many names. Gh’aban, ghotala… Indians are well aware of scams by politicians, bureaucrats and business houses. Scams are not only prevalent in our country but also traced in Japan, US and other advanced countries. We are also aware about the destinations of this moola. Swiss banks are the place where scams-ters put their hard earned money (with blood of the poor victims). These banks provide private banking services to ultra-rich clients. Complete secrecy is maintained. No government or any party on this earth can get accounts’ information from these wealth managers.

No one has idea about the number of netas, babus and banias who hold secret accounts in the banks of Switzerland and no clue about the money locked in. Recently the tax authorities in US have encountered tax-evasion and investment of laundered money in UBS AG and Credit Suisse. Switzerland’s bank secrecy laws have come under increasing scrutiny in many countries. This issue has even caught the limelight in the summit of G-20 countries. Lichtenstein and Monaco are other tax havens.

The International Money Laundering Information Network states, “Serious efforts have been, and continue to be, made to create greater transparency in financial matters, but the offshore financial world remains for a large part a ‘Bermuda triangle’ for financial investigations.”

The supporters of bank-secrecy say that this is a legal contract between two parties for ‘not to reveal’ anything. But those against this concept are of the view that ‘funds being misused to commit terrorism, money laundering, tax evasion, or other misconduct.’ UBS has turned over the names of nearly 300 clients who owned the Swiss accounts. International news agency AFP is reporting that UBS rejected a new U.S. government lawsuit filed late last week asking that the bank disclose the identities of some 52,000 U.S. customers who allegedly evaded taxes. The U.S. government estimates approximately $14.8 billion is hidden in the Swiss accounts.

Any way this is a matter of shame that when millions of people are losing their jobs due to economic crisis, some richest of the rich are not fulfilling their civil and legal responsibilities of paying taxes. Thanks to “bank secrecy” poor are not getting loaf of bread. Few banks have suggested their executives not to travel abroad to avoid arrests by the authorities of host countries. A fresh report reveals that ‘Switzerland agreed to loosen bank secrecy for foreign clients.’ The wheel has started rolling in the right direction. We can now hope for a transparent banking system. Furthermore this will only create more “white money” and reduce some of the “black money”.

Come on, Nationalize!

The nationalization debate has started. The governments in US and UK are pumping rescue funds or bailout money in the financial giants for almost a year now. AIG, Citi, BofA, RBS etc. have been provided with billions of dollars from the taxpayers’ money. Still the mount of capitalism is shy of using the term “nationalization”. Fed Chairman Ben Bernanke and FDIC chief Sheila Bair call this concept a non-sense.

Nationalization, at this stage, is almost necessitated in order to prevent further collapse of the financial institutions. Depository institutions are the life-blood of a nation’s trade and well-being, and cannot be allowed to play roulette with the citizens’ money. Nouriel Roubini, a well-respected economist has been pushing the nationalization idea for several weeks now. Roubini proposes that the government nationalize all the banks that are deemed insolvent as per the Treasury’s ‘stress-test’, and quickly separate the acquired assets into good and bad for easy disposal.


Indira Gandhi’s government nationalized all 14 of India’s largest banks in one fell swoop in 1969. In a second act, the government nationalized the six next largest banks back in 1980. Today, out of the 88 commercial banks in India, 27 (the largest, including State Bank) have the Indian Government as the largest shareholder. To put in perspective, 75% of the country’s banking assets are in the hands of our trusted government. Also to note is that the Reserve Bank of India, the counterpart of the US Fed is completely nationalized, unlike the Fed which is a quasi-autonomous entity with sometimes squeamish objectives.

Free markets only work when they can self-regulate effectively, which is somewhat ironical given that they only exist because of individuals’ greed. Nationalization is a need of the hour. Be rational in taking decisions and making comments.

No Bonus

The Indian Prime Minister Dr. Manmohan Singh had once remarked about sky high packages of CEOs. This time executive bonuses have hit the limelight in US. There was a time when a middle level manager would get a joining bonus almost equal his hefty annual salary. The worth of a person was measured by his CTC. As the economy entered into recession, executives are saying ‘no bonus’ “thanks God my job is safe.”

Securities industry in US granted its employees $18.4 billion in bonuses – a revelation that President Barack Obama characterized as “shameful.” Surely when the sector and economy is bleeding, people are losing their jobs and the future is dark it is a shame to declare bonus. In England a lavish party was thrown to the employees of Royal Bank of Scotland even after bailout money was given to company by the Government.

In my company there is no bonus for H2. Performance Appraisal will take place. The salary increments based on appraisal. May God it takes place! The bad news are circulated everyday. Many companies have announced freezing of annual increments. Experienced, times are tough. Hit the bears eye. Fresher, good luck!

The Book Says

He likes the literary value of this book. A book he purchased for Rs. 65 in a Book Fair. He enjoys the couplets and tries to derive meaning out of them. They are full of meanings, like the 3D figures wrapped in a single stanza.

He puts this treasure trove on one side of his pillow and goes into deep sleep. When he wakes up the book is not there. What’s it? He murmurs. He comes out in the courtyard. The book is in her hands. She is immersed in poetry. Now he is with lots of thought and without words.

She is polite still rustic, she is naive still confident. She suddenly finds a piece of paper inside the book. Her lips read:

sukoot-e-sham judai hua bahana mujhe
kisi ki yaad ne sikhla diya tarana mujhe

And asks, “Whose remembrance has taught you the anthem”? He answers, “This is the hymn of love, and my dear your memory has taught me this sacred song”. But he doesn’t utter a single word.